Reforms, capital demand to drive private equity investments in 2018

Government reforms such as the Insolvency and Bankruptcy Code, Rera, GST and the bank recapitalisation plan have contributed to the Indian economy’s maturation

Last year was defined by a number of substantive initiatives to drive economic stability.

Reforms such as the Insolvency and Bankruptcy Code, The Real Estate (Regulation and Development) Act (Rera), goods and services tax (GST) and the bank recapitalisation plan have contributed to the Indian economy’s maturation, and these initiatives serve as a strong indication of the government’s longer-term focus on developing the economy.

These efforts have also helped to boost long-term investors’ confidence.

If the government continues to introduce reforms and successfully uphold existing ones over the next three to seven years, India will have a unique opportunity to see key industries and nationally important companies develop, particularly with the support of these long-term investors.

Last year was a particularly interesting one for private equity (PE), which saw capital flows increase due, in part, to this growing investor confidence, coupled with robust monetisation and returns.

The sentiment of investors in private equity funds—our global community of limited partners—is also positive on India and, more broadly, the Asia Pacific, which enables firms like KKR to accelerate our investment in India.

In terms of India’s recent initiatives, the enhanced clarity on taxation and efforts to strengthen India’s capital markets have motivated private equity firms to invest in local businesses, while also providing investors with more tools to enhance companies’ operations.

This comes as more entrepreneurs have not only been willing to sell stakes in their businesses to PE firms but are welcoming PE for the value-added proposition it brings.

PE’s expertise is also relevant as many attractive companies seek deleveraging and succession planning solutions. These considerations will drive even more private equity activity in 2018.

We also anticipate 2018 to bring more investment in India’s core sectors, as well as larger control investments where private equity can be transformative.

We’ve had an ongoing dialogue with the country’s largest corporations on how we can help them to deconsolidate and provide them with the required capital for their growth both in India and internationally.

We’ve also had an ongoing dialogue with medium-sized companies seeking growth capital to help them scale and improve productivity.

On the credit side, we are excited to provide long-term financing to help regenerate bad assets and ensure that they have the necessary working capital in light of banks’ constrained lending.

To support these efforts, we have diverse pools of capital such as a corporate non-bank finance company and a global special situations fund to fill the gap.

Looking ahead to 2018, the time is right for private equity investors to invest in India. The reforms introduced by the government in recent years has bolstered confidence in the country and across industries, and many terrific businesses and entrepreneurs are still in need of capital.

More companies today are looking to elevate to the next level off the back of these strong structural reforms, and equity lenders and credit providers have a significant role to play.